When selling consumer goods online, retailers with established brands enjoy advantages over their Internet-only competitors. But when it comes to online grocery shopping, brick-and-mortar chains appear to lag behind a small number of energetic pure players.
Like mobile advertisements, the beige trucks of Webvan zoom through my Atlanta neighborhood every day, prompting the curious to ask, "What would it be like to buy groceries on the Internet? Would it be easier? Cheaper? Would the produce be as fresh?"
Sprouting new customers A growing number of consumers are finding out for themselves. Web-van, which announced plans in June to acquire competitor HomeGrocer.com in a $1.2 billion stock swap, now serves Atlanta, Sacramento, Calif., the San Francisco Bay area, and Chicago. And the company will likely begin serving nine other major U.S. cities by the end of 2000, according to The New York Times.
Meanwhile, I've yet to spot a delivery truck sporting the logo of any of Atlanta's leading brick-and-mortar grocers. That's because the Internet strategies of many of the top U.S. grocery chains are still in the planning stages, even as consumers become more familiar with online players such as Webvan, Peapod and Streamline.
Publix announced plans in April to move online but hasn't yet launched its service. Kroger teamed with Priceline.com in June to allow consumers to bid on groceries but hasn't revealed a broader online plan. "The bigger players need more time to decide on their strategies," notes Michael Spindler, president of MyWebGrocer.com, which helps brick-and-mortar grocers move online. "When you have 1,000 stores, rather than 10, you have less flexibility."
According to Forrester Research, a Cambridge, Mass.-based market research firm, only 2.8% of Americans buy groceries online. But numbers change, and traditional grocers feel that they can't ignore the Internet. "They're all trying to figure out what to do," Spindler says. "There's a huge amount of trepidation."
An option for smaller chains That trepidation is particularly acute among independent grocers and smaller chains. Unlike Wal-Mart, Spindler notes, these businesses don't have $100 million to spend on an Internet strategy. And unlike the Dutch grocery conglomerate Royal Ahold - which recently acquired 51% of Peapod - their pockets aren't deep enough to buy the expertise of an existing dot.com.
At MyWebGrocer.com, Spindler provides an e-commerce application that allows grocers to quickly launch inexpensive e-commerce channels. "If I'm shopping online, I go to the grocer's website, click on the `online shopping' button, and then that link will take me to a list of that chain's stores," he explains. "Once I've clicked on the store where I want to shop, MyWebGrocer hosts the application."
The site is customized to match the look and feel of different retailers. "The grocers tell us the products that they sell and we provide the images and label information," Spindler says.
As far as inventory, the retailers basically treat MyWebGrocer.com as though it were another store location. "The retailers send us inventory and point-of-sale information weekly, as well as advertising and promotions, new products, and products that they no longer carry," Spindler explains. "We sweep all of that into the system."
MyWebGrocer earns its money by charging a per-transaction fee. The company now works with about 25 retailers providing training, supplying sales data and giving advice on marketing strategies.
Healthy demand Spindler predicts that online grocery shopping is here to stay. He says retailers should move quickly to compete with the Webvans of the world. "There's a lot of pent-up demand for these services," he notes.
Companies such as MyWeb Grocer.com could help smaller grocers bridge retail's version of the "digital divide." As Webvan continues to grow and the biggest chains move online, it will be interesting to learn whether there's a place in cyberspace for little corner groceries.